On Aug 22, 2014, we issued an updated research report on
Bank of America Corporation
). BofA has finally resolved all the actual and probable civil
mortgage claims. The company announced a $16.65-billion settlement
deal with the U.S. Department of Justice, a few other regulators
and Attorneys General of six states.
Though the settlement amount would hurt BofA's third-quarter 2014
results, it presently removed a huge litigation overhang. We
believe that this would allow BofA to focus on its revenue growth.
The company has been facing continued pressure on top line owing to
a still low interest rate environment and several regulatory
restrictions on fee income. Further, low client activity has been
also hurting the revenues.
At the same time, BofA continues to align its banking center
network according to its customer needs. The company, while
continuing to close/sell branches in markets where growth potential
does not meet its criteria, is expanding in markets with strong
growth potential. This strategy would also aid in augmenting the
bank's top-line growth.
However, on the flip side, BofA, like other Wall Street biggies,
continue to face an increasing number of new regulations. Such
changes will likely have a significant impact on the bank's
performance. Also, stricter capital requirement is expected to
partially reduce the company's flexibility with respect to business
investments in the medium term.
Over the last 30 days, analysts have been more or less neutral on
BofA. For 2014, the Zacks Consensus Estimate declined by a penny to
79 cents per share, while for 2015 it remained stable at $1.51 per
BofA presently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked banking stocks include City National Corporation
), BofI Holding, Inc. (
) and Farmers Capital Bank Corporation (
). All these stocks carry a Zacks Rank #2 (Buy).
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CITY NATIONAL (CYN): Free Stock Analysis Report
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